One of the most complex areas of international HRM is compensation. Different countries have

different norms for employee compensation. Managers should consider carefully the motivational

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use of incentives and rewards in foreign countries. For Americans, while nonfinancial incentives

such as prestige, independence, and influence may be motivators, money is likely to be the

driving force. Other cultures are more likely to emphasize respect, family, job security, a

satisfying personal life, social acceptance, advancement, or power. Since there are many

alternatives to money, the rule is to match the reward with the values of the culture.


In individualistic cultures, such as the United States, pay plans often focus on individual

performance and achievement. However, in collectively oriented cultures such as Japan and Tai-

wan, pay plans focus more on internal equity and personal needs.

In general, a guiding philosophy for designing pay systems might be “think globally and

act locally.” That is, executives should normally try to create a pay plan that supports the overall

strategic intent of the organization but provides enough flexibility to customize particular

policies and programs to meet the needs of employees in specific locations. After a brief

discussion of compensation practices for host-country employees and managers, we will focus on

the problems of compensating expatriates.





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